Abusive Tax Shelters

My accountant recommended this strategy as a tax reduction device and said it was safe. Now the IRS lists the strategy as an abusive tax shelter. What should I do?
The IRS has begun an aggressive campaign against abusive tax shelters and their promoters. It is not uncommon for promoters to zealously defend themselves against this initiative, sometimes at the expense of investors. In this uncertain environment, it is important that you are protected and your rights are not compromised. Our attorneys will aggressively protect your interests against the IRS and against the promoter to ensure that you achieve the best possible resolution.

What is a "Listed Transaction" and what does it mean to me?
IRS regulations on abusive tax shelters provide that a taxpayer must disclose certain transactions know as "listed transactions" by filing a disclosure statement (Form 8886) with its tax return. A "listed transaction" is a transaction that is the same as or substantially similar to one that the IRS has determined to be a tax avoidance transaction and identified by IRS notice or other form of published guidance.

The promoter assured me that its attorneys would represent me if I ever got audited. Why shouldn't I use them?
If the promoter made misrepresentations that you relied on in purchasing the shelter, it is very likely that conflicts of interest exist between you and the promoter that would make it difficult or impossible for its counsel to effectively represent you before the IRS. It is also unlikely that the promoter's attorneys will alert you to any claims you may have against the promoter. Thus, it is important that you have counsel who will defend your interests and only your interests.

The promoter gave me a legal opinion stating that this tax strategy should withstand IRS scrutiny. Doesn't this protect me?
In most cases, no. The vast majority of shelters come with legal opinions stating that there is substantial authority for the tax strategy. These opinions (called "more likely than not" opinions) are used as a marketing device and are touted by the promoter as a means of escaping penalties in the event the IRS challenges the shelter. Many of the opinions either misstate the strategy or contain assumptions, caveats or qualifications that make the opinion essentially meaningless. The IRS has begun an initiative to crack down on these types of legal opinions.

What is my remedy against the promoter?
Possible remedies include any back taxes, penalties and interest you owe the government. You may also be entitled to return of your investment; return of all costs or fees paid to the promoter or others to implement the strategy; restitution for any damages caused by your investment in the shelter; and reimbursement of attorneys fees you incurred.

Please contact us if you have any questions or if you want to inquire about representation from an abusive tax shelter attorney.